Yen Climbs After China Data as Kuroda Touts Recovery

May 5 (Bloomberg) -- The yen strengthened versus most of
its 16 major peers as a private report showing Chinese
manufacturing contracted more than economists estimated last
month spurred demand for safer assets.

Japan’s currency touched a two-week high against the dollar
as violence in Ukraine spread and after Bank of Japan Governor
Haruhiko Kuroda said in an interview with CNBC the economic
recovery is on track, damping speculation the central bank will
add to monetary stimulus. Brazil’s real fell the most among
major dollar counterparts after the central bank reduced the
volume of foreign-exchange swap contracts that it offered to
roll over, signaling eased support for the currency. Sweden’s
krona weakened after a report showed industrial production
unexpectedly contracted in March.

There’s a “slightly risk-off tone in market as Japanese
yen has moved some accordingly,” said Fabian Eliasson, foreign-exchange sales at Mizuho Financial Group Inc. in New York. The
yen has gained amid “China purchasing managers’ index that was
slightly disappointing as well as continued tension in
Ukraine,” he said.

The yen gained 0.1 percent to 102.14 per dollar at 5 p.m.
New York time, after touching 101.87, the strongest since April
17. Japan’s currency advanced 0.1 percent to 141.72 per euro.
The shared currency was little changed at $1.3875.

Markets in Japan and the U.K. were shut today for national
holidays.

Real Falls

The real dropped 1 percent to 2.2442 per U.S. dollar, the
biggest decline among 16 major currencies tracked by Bloomberg.

The krona dropped as Statistics Sweden said industrial
production fell 3.8 percent in March, after rising a revised 2
percent the previous month. The median estimate in a Bloomberg
News survey of economists was for a 0.5 percent increase.

The currency declined 0.7 percent to 9.0934 per euro and
slipped 0.7 percent to 6.5532 per dollar

The Turkish lira climbed against most of its 31 major
currencies tracked by Bloomberg as the statistics agency in
Ankara said consumer prices rose at an annual rate of 9.38
percent last month, the quickest since April 2012.

The lira appreciated 0.3 percent to 2.1002 per dollar. The
currency rose for an eighth day, its longest winning streak
since April 2010.

ECB Watch

The European Central Bank, which is considering taking
unprecedented steps to avert the risk of deflation, including
negative interest rates or implementing quantitative easing, may
take action as early as this week when its Governing Council
meets in Brussels. The European Commission predicted low
inflation will remain a threat to euro-area expansion for at
least the next two years as it trimmed its economic-growth
forecast and warned of the impact of tensions with Russia.

The euro has rallied 1 percent against the greenback this
year and gained 0.7 percent last month.

China’s yuan strengthened the most in almost a month after
the central bank raised the currency’s reference rate. The
People’s Bank of China boosted the yuan’s daily fixing by 0.03
percent to 6.1560 per dollar.

The currency rose 0.22 percent, the most since April 8, to
6.2455 per dollar in Shanghai, China Foreign Exchange Trading
System prices show.

Factory Index

A purchasing managers’ index for China’s manufacturing was
at 48.1 in April, HSBC Holdings Plc and Markit Economics said
today. That compared with 48 the previous month and a 48.4
median estimate from analysts surveyed by Bloomberg News.
Numbers below 50 indicate a contraction.

“There is slight risk aversion” that is supportive of the
yen, said Niels Christensen, chief currency strategist at Nordea
Bank AB in Copenhagen. “We had some soft data from China, which
is negative for risk appetite.”

Ukraine continued military operations to dislodge rebels
from its eastern industrial heartland as violence that’s spread
to the Black Sea gateway of Odessa threatens to loosen Kiev’s
control of the regions.

In an interview with CNBC dated yesterday, the BOJ’s Kuroda
said private economists have been “consistently wrong” on
Japan. Nominal wages are expected to rise, he said. Westpac
Banking Corp. ended its recommendation to buy the dollar against
the yen as Kuroda signaled no immediate expansion in monetary
easing.

Japan Outlook

“Kuroda is currently ‘talking down’ the chances of further
monetary policy developments in the near term,” Robert Rennie,
the head of currency and commodity strategy at Westpac in
Sydney, wrote in a research note today. “Arguments for being
long USD/JPY right now are running very thin.” A long position
is a bet an asset will appreciate.

The Bloomberg Dollar Spot Index was little changed after
last week’s drop, before Federal Reserve Chair Janet Yellen
testifies to lawmakers this week.

Yellen said on April 16 that wage increases remain at an
historically slow pace with “few signs” of a broad-based
acceleration. She is due to testify on May 7 to the Joint
Economic Committee of the U.S. Congress. Futures traders see
about a 7 percent chance the Federal Open Market Committee will
raise benchmark borrowing costs in December.

The U.S. Labor Department said on May 2 that employment
climbed 288,000 in April, the most since January 2012.
Unemployment dropped to 6.3 percent, the lowest level since
September 2008.

The Bloomberg Dollar Spot Index, which monitors the
greenback against 10 major counterparts, fell 0.02 percent to
1,007.55. It declined 0.3 percent last week and 1.2 percent this
year.